Category: Financial Institutions

Squatter in BofA’s Boca Mansion

Bank of America (BofA) is moving to evict a squatter in one of its many foreclosed Florida properties:

Andre Barbosa’s days of stylish squatting in a $2.5-million Boca Raton mansion may be numbered. . . . Adverse possession is a state law which allows someone to move into a property and claim the title — if they can stay there seven years. Barbosa, who calls himself “Loki boy,” posted a signed copy of his “adverse possession” note in the home’s front window.

I’m sure Florida’s efficient judicial system will put this to right forthwith. And if they mess up a bit of paperwork along the way, no worries—independent reviewers can investigate. BofA has been the conscience of the finance community. It would be a grave injustice to see it facing losses due to people claiming title to property they don’t really own.

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Young Business Law Scholar Call for Papers

The Center for Law, Economics & Finance (C-LEAF) at The George Washington University Law School has announced its third annual Junior Faculty Business and Financial Law Workshop and Junior Faculty Scholarship Prizes.  This year’s Workshop will be held on April 5-6, 2013 at GW in Washington.

The Workshop supports and recognizes the work of young legal scholars in accounting, banking, bankruptcy, corporations, economics, finance and securities, while promoting interaction among them and selected senior faculty. By providing a forum for the exchange of creative ideas in these areas, C-LEAF aims to encourage new and innovative scholarship.

I’ve participated in both previous Workshops and can attest that participants have benefited from the exchange of ideas and getting acquiainted with newer scholars.  About 100 papers are submitted and the C-LEAF faculty select about 10 for presentaiton.  At the Workshop, senior scholars comment on each paper, followed by a general discussion.

Three papers receive Junior Faculty Scholarship Prizes of $3,000, $2,000, and $1,000, respectively. All prize winners will be invited to become Fellows of C-LEAF.  C-LEAF makes no publication commitment, but chosen papers are featured on its website as part of the C-LEAF Working Paper series.   Read More

Private Equity Achieves Extraordinary Numbers in Health and Education

The N.Y. Times has recently profiled a chain of for-profit hospitals known as HCA. The two articles are well worth reading, particularly for insights into the manipulation of medical billing and coding:

At HCA in 2006, slightly more than a quarter of the payments it received from Medicare were for patients classified in the two highest-paying categories, far behind the 58 percent reported at other hospitals, according to an analysis of Medicare payments by The Times, using data provided by the American Hospital Directory. During that time, HCA was still operating under a corporate integrity agreement resulting from its Medicare fraud settlement, and an independent reviewer was scrutinizing its billing.

By late 2008, however, just as the agreement with federal regulators was ending, HCA introduced a new coding system for its emergency rooms. HCA said the system, based on a method developed by the American College of Emergency Physicians, was less complicated and better captured the time and resources used by the hospital. Nearly overnight, HCA’s patients appeared to be much, much sicker. By 2010, HCA had surpassed other hospitals, with 76 percent of its payments coming from the two most expensive classifications, versus 74 percent for other hospitals.

Perhaps some Freakonomist will conclude that independent reviewers are vital to improving public health. But the better explanatory variable appears to be the role of private equity firms in reshaping HCA after buying it in 2006. They are revolutionizing the service sector. Just consider the miraculous work of a private equity group in getting “50 full-time faculty members to teach 90,000 online students” at a university it controls. Truly the business model of the future.

Lies and Libor

It’s fashionable for some finance experts to dismiss reporters like Matt Taibbi as hyperbolic. How dare he compare a muni bond rigging scandal to Mafia tactics? But the more one digs into high finance’s behavior, the clearer a pattern of criminality and recklessness emerges. Taibbi was on a cordial and enlightening panel with Gillian Tett back in 2009, and if any finance reporter’s work is considered impeccable by the establishment, it is hers. Consider her perspective on the latest outrage regarding the setting of Libor:

Five long years ago, I first started trying to expose the darker underbelly of the Libor market. . . .At the time, this sparked furious criticism from the British Bankers’ Association, as well as big banks such as Barclays; the word “scaremongering” was used. But now we know that, amid the blustering from the BBA, the reality was worse than we thought. As emails released by the UK Financial Services Authority show, some Barclays traders were engaged in a constant and pervasive attempt to rig the Libor market from 2006 on, with the encouragement of more senior managers. And the British bank may not have been alone.

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Stanford Law Review, 64.5 (2012)

Stanford Law Review

Volume 64 • Issue 5 • May 2012

Articles
The City and the Private Right of Action
Paul A. Diller
64 Stan. L. Rev. 1109

Securities Class Actions Against Foreign Issuers
Merritt B. Fox
64 Stan. L. Rev. 1173

How Much Should Judges Be Paid?
An Empirical Study on the Effect of Judicial Pay on the State Bench

James M. Anderson & Eric Helland
64 Stan. L. Rev. 1277

Note
How Congress Could Reduce Job Discrimination by Promoting Anonymous Hiring
David Hausman
64 Stan. L. Rev. 1343

British Paradoxes

I’ve recently heard Martin Wolf described as one of the world’s preeminent financial journalists (here and here). I was therefore puzzled to read his column characterizing banking as a “high productivity sector[].” In March, 2011, Wolf called the financial sector “locusts” in his Ralph Milliband Lecture. I doubt anyone who listened to the lecture would get the idea that Wolf wanted to praise the implicit governmental backing that is at the heart of the sector’s prosperity as a model of “productivity.” The paradoxes here are enough to make me turn to James Livingston’s discussion of productive capacity in the appendix of his recent book Against Thrift.

On another puzzling note from Britain: it appears that Nassim Taleb has become a key advisor to David Cameron, the Prime Minister. The Tories have seized on Taleb’s withering skepticism as an epistemological foundation for a politics of austerity (that is, since no one has any idea what to do, the safest thing is for government to do nothing but downsize itself). I think Taleb may be poised for a long career as a bipartisan advisor, since Labour could use theories of epistemic modesty to prove that no one knows if government intervention would fail.

The Tories aren’t going whole hog for Taleb, though: they appear singularly uninterested in his proposals to end bonuses at TBTF banks, or to break them up. I strongly suspect that the only parts of the Taleb program that will pass are those that help entrench existing elites—a selective adoption that only exacerbates the fragility he identifies as the critical problem of modern society.

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Stanford Law Review, 64.4 (2012)

Stanford Law Review

Volume 64 • Issue 4 • April 2012

Articles
The Tragedy of the Carrots:
Economics and Politics in the Choice of Price Instruments

Brian Galle
64 Stan. L. Rev. 797

“They Saw a Protest”:
Cognitive Illiberalism and the Speech-Conduct Distinction

Dan M. Kahan, David A. Hoffman, Donald Braman, Danieli Evans & Jeffrey J. Rachlinski
64 Stan. L. Rev. 851

Constitutional Design in the Ancient World
Adriaan Lanni & Adrian Vermeule
64 Stan. L. Rev. 907

The Copyright-Innovation Tradeoff:
Property Rules, Liability Rules, and Intentional Infliction of Harm

Dotan Oliar
64 Stan. L. Rev. 951

Notes
Testing Three Commonsense Intuitions About Judicial Conduct Commissions
Jonathan Abel
64 Stan. L. Rev. 1021

Derivatives Clearinghouses and Systemic Risk:
A Bankruptcy and Dodd-Frank Analysis

Julia Lees Allen
64 Stan. L. Rev. 1079

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Stanford Law Review, 64.3 (2012)

Stanford Law Review

Volume 64 • Issue 3 • March 2012

The Material Foundations of Corporate Culture: Goldman’s Lessons for Silicon Valley

Two resignation letters rocked Wall Street and Silicon Valley this week. Greg Smith elegized a once-great Goldman Sachs, now reduced to “ripping eyeballs out” of clients. (The industry sure has changed since the 90s, when the goal was to rip off the whole face of the client. I guess Dodd-Frank is working.)

On the West Coast, James Whittaker explains “Why I Left Google.” His complaints are more measured than Smith’s: “The old Google made a fortune on ads because they had good content. It was like TV used to be: make the best show and you get the most ad revenue from commercials. The new Google seems more focused on the commercials themselves.” Whittaker laments that the company has become obsessed, Ahab-like, with the social web’s whale, Facebook.

On one level, it’s not fair to compare the companies: the engineers at Google have contributed far more to society than finance’s “money-massagers.” Goldman represents the terminal phase of a liquidationist capitalism unmoored from social value. But its culture did not rot overnight. Rather, legal and material factors accelerated decay. Silicon Valley’s managers and regulators should take notice: the same process could happen there.
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On the Servicing Settlement

Today, Jon Walker tweeted that “No one man has done more to protect the power of the financial elites than President Obama.” Is that a fair assessment? Here are some views expressed on the mortgage settlement today:

Adam Levitin, The Servicing Settlement: Banks 1, Public 0:

[The settlement] cover[s] robosigning and overbilling in foreclosures. Given the relatively narrow scope of this settlement, it’s not surprising that the dollars involved are quite small compared to the overall harms created by the housing bubble and aftermath.

The formal price tag for the settlement is $25 billion, although it is projected to accomplish up to $40 billion in relief. Only $5 billion of that is hard cash contributed by the banks. Let me repeat that. The five banks involved in the settlement, which have a combined market capitalization of over $500 billion, are putting in only $5 billion. That’s less than 1% of their net worth. And they are admitting no wrongdoing. To call that accountability is laughable. . . . $32 billion of the settlement is being financed on the dime of MBS investors such as pension funds, 401(k) plans, insurance companies, and the like—-parties that did not themselves engage in any of the wrong-doing covered by the settlement.

William K. Black, How Liberals are Getting Spun in the Mortgage Settlement Debate:
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